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Malaysia’s stock market, once deemed world’s worst, on the rebound

The Malaysian stock market, which Bloomberg had described as 'the world’s worst major stock market' earlier this year, is on the rise again having drawn some US$84 million from foreign investors last week. — Picture by Hari Anggara. Sketched by the Pan Pacific Agency.

KUALA LUMPUR, Jun 11, 2019, MalayMail. After months of scrimping on public spending, the Pakatan Harapan (PH) government is showing signs of easing its purse strings and reviving large state projects as investors return to Malaysia, reported the MalayMail.

Bloomberg reported today that foreign investors have been coming back, adding that the turnaround would be a boost to Prime Minister Tun Dr Mahathir Mohamad’s government, which saw over US$3 billion (RM12.4 billion) of foreign funds flow out of the market since last year.

This is despite criticism from Opposition parties, including former prime minister Datuk Seri Najib Razak who was also the previous finance minister, that the new PH government’s policies and domestic politics scared off foreign investors.

According to Bloomberg, the Malaysian stock market, which it had described as “the world’s worst major stock market” earlier this year, is on the rise again having drawn some US$84 million from foreign investors last week, the most since late January.

It reported that the FTSE Bursa Malaysia KLCI Index has also clawed back about half of this year’s loss of more than 5 per cent, which was what earned Malaysia the unwanted title as the world’s worst stock market.

Business analyst Areca Capital Sdn Bhd called for buys on Malaysian company shares, saying earnings will not be dropping from here on.

Its chief executive officer Danny Wong told Bloomberg that it started to buy stocks from Malaysian glove makers and consumer and digital services about two weeks ago.

“There is a bottom in earnings downgrades if you look at results, too-low expectations and low base,” he was quoted saying.

Surprise earnings and hopes of more interest rate cuts at government-linked companies like Telekom Malaysia Bhd and Tenaga Nasional Bhd have also aided investor sentiment, according to Bloomberg.

“Reforms at state-linked companies, more political clarity and stimulus could see the benchmark gauge surge to 1,800 in the base scenario, or even reach 1,900 in the bullish case, Macquarie Group Ltd.’s analysts wrote in a note on April 26. The gauge retreated 0.1 per cent to 1,654.03 as of the midday break in Kuala Lumpur,” the international business wire agency said in the report.

It noted that investors see Malaysian equities safe for trading amid the ongoing US-China trade war.

Among the biggest gainers in the market rebound have been the nation’s builders, with the Bursa Malaysia Construction Index surging 35 per cent so far this year.

“We see further revivals of large-scale infrastructure projects as catalysts that may provide further upside for construction stocks,” RHB Investment Bank Bhd analyst Tay Yow Ken was quoted saying.

However, not all analysts are optimistic. Samsung Asset Management Co regional fund manager Alan Richardson was quoted saying that the government lacked fiscal flexibility amid the external challenges.

The stock gauge has rebounded 3.5 per cent since dropping to a low not seen since 2015 on May 24.

The index is valued at 16.2 times projected 12-month earnings, down from this year’s peak of 16.5 in March, according to Bloomberg data.

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